Title: The trade-off between income distribution and the capacity of governmental public investment in Brazil

Authors: Carlos Alberto Grespan Bonacim; Adriana Maria Procópio De Araujo; Antônio José Maristrello Porto

Addresses: Faculty of Economics Business Administration and Accounting, University of São Paulo, Bandeirantes Ave, Monte Alegre, bloc A, FEARP, 14040-905 Ribeirão Preto, São Paulo, Brazil ' Faculty of Economics Business Administration and Accounting, University of São Paulo, Bandeirantes Ave, Monte Alegre, bloc A, FEARP, 14040-905 Ribeirão Preto, São Paulo, Brazil ' FGV Direito Rio, Praia de Botafogo, 190 – Botafogo, Rio de Janeiro – RJ, 22250-900, Brazil

Abstract: The free cash flow signals how much the state gives back or distributes to a society, without putting the capacity of investment in infrastructure at risk. The objective of this study is to evidence how the public administrators can demonstrate the amount distributed (income, benefits, and aids) to the society in order to fight the social inequality, without affecting its own capacity of making investments. We validated the analysis through the Chow test in the historical series from 1995 to 2010. The data are from the public finances in the counties of the state of São Paulo, Brazil. The results obtained suggest significant evidences that the 'Lei de Responsabilidade Fiscal Brasileira' (Brazilian Fiscal Responsibility Law) affected positively the cash flow available for the society, giving the state a greater income distribution potential without risking the capacity of making investments in infrastructure, signalling improvement in the quality of the Brazilian public expense.

Keywords: public administration; social inequality; public finance; fiscal responsibility law; FRL; Brazil; income distribution; government investment; public investment; infrastructure investment; cash flow.

DOI: 10.1504/IJBSR.2015.066807

International Journal of Business and Systems Research, 2015 Vol.9 No.1, pp.49 - 66

Available online: 06 Jan 2015 *

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